Hogs see technical pressure, while cattle waits for demand

Livestock Report

Hogs: Cash markets were lower on Wednesday with sharply lower product value at noon causing traders to reduce long positions. Funds and speculators are carrying a long position in hogs, which makes this market very sensitive to technical support and resistance.

Seasonal studies suggest hog supplies should increase over the next few months. However with the loss of pigs from the PED virus and the outlook for cheaper feed cost, it is likely producers will be holding back some gilts for breeding. This could be important for cash hog prices as overall supplies are currently tight.

Lean hog futures are finding support due to the sharp discount to the CME cash index. October contract resistance crosses at 87.07 with major support at 84.70. The 50-day moving average crosses at 84.02. Based on our fundamental analysis we want to sell rallies in October Lean Hogs.
 
Cattle: Cattle futures ran into some headwinds Wednesday as outside markets came under pressure. The higher dollar and sharp sell-off in crude oil had funds and investors taking profits.

Cash cattle traded in Kansas Wednesday at $119, steady with last week. Feedlots are asking 121 with packer interest limited. Product at noon was higher on choice and select on 126 loads.

Historically, we should have seen the low made in cash cattle last week. The demand for product should pick up in early August as we see some institutional purchasing. We are in peak vacation season before school starts, which also limits retail counter demand for meat.

Traders are ready for any confirmation of a low in the feed market as futures are near resistance in a technical uptrend on the chats. October cattle has support at 125 and resistance at 127. Our bias is to be long cattle especially in 1st quarter 2014 contracts.

About the Author
Rich Nelson

Rich Nelson is Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.

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